Forecasting Cash Price Volatility of Fed Cattle, Feeder Cattle, and Corn: Time Series, Implied Volatility, and Composite Approaches

Manfredo, Mark R.; Leuthold, Raymond M.; Irwin, Scott H.

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https://hdl.handle.net/2142/4021 Copy

Description

Title

Forecasting Cash Price Volatility of Fed Cattle, Feeder Cattle, and Corn: Time Series, Implied Volatility, and Composite Approaches

Author(s)

• Manfredo, Mark R.
• Leuthold, Raymond M.
• Irwin, Scott H.

Issue Date

1999-12

Keyword(s)

volatility forecasts

Abstract

"Considerable research effort has focused on the forecasting of asset return volatility. Debate in this area centers around the performance of time series models, in particular GARCH, relative to implied volatility from observed option premiums. Existing literature suggests that the performance of any volatility forecast is sensitive to both the data and forecast horizon of interest. This paper rigorously examines the performance of several alternative volatility forecasts for fed cattle, feeder cattle, and corn cash price returns. Forecasts include time series, implied volatility, and composite specifications. The results provide considerable insight into the performance of these alternative volatility forecasting procedures over a range of relevant forecast horizons. The evidence suggests that composite methods be used when both time series and implied volatilities are available. Insight is also gained into the performance of procedures used for scaling one-period volatility forecasts to longer horizons. However, consistent with the existing volatility forecasting literature, this research confirms the difficulty in finding a ""best"" volatility forecasting method across alternative data sets and horizons."

Publisher

Office for Futures and Options Research, Department of Agricultural Economics, College of Agricultural, Consumer, and Environmental Sciences at the University of Illinois at Urbana-Champaign

Series/Report Name or Number

OFOR Working Paper Series, no. 99-08

Type of Resource

text

Language

eng

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http://hdl.handle.net/2142/4021

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